5 Myths About Charitable Giving

Make a couple of mental notes about this list for the next time you hear an argument about the importance of the income tax deductions for your favorite charity.

One of my hobby horses for years has been complaining about "not-for-profit" hospitals and medical centers which serve a money-laundering operations for vast campuses of FOR profit clinics, labs, specialty groups, private practices, device makers, and the endless number of non-medical ancillary services required to support them. And don't forget the drug companies whose revenue streams need to be fat enough to air all those prime-time commercials for the latest of designer drugs, particularly those for erectile dysfunction. And did I mention platinum executive compensation packages, sales bonuses and volume discounts?
If this is health care let me remain solvent unless my life is in danger. Don't get me started...

From the Washington Post.
1. Charities are principally dedicated to serving the poor and needy.

There is incredible diversity among charities, from tiny neighborhood food banks to multi-state hospital chains boasting lavish concierge services and million-dollar salaries for executives. In fact, hospitals are the largest component of the U.S. charitable sector, but they are more likely to be profitable than for-profit hospitals and aren’t much more likely to serve the needy.

2. Donors should reward charities that have low overhead.

Low overhead has become a point of pride — and marketing — for charities such as the Brother’s Brother Foundation, a Pittsburgh-based relief organization whose Web site boasts that “less than 1% of the value of donations [is] used for overhead.”
But charities need to spend on research, training and financial systems, all classified as “overhead,” to be effective. Those that shortchange these investments — and many do — are less likely to achieve their goals. 

3. Tax incentives are critical to charitable giving.

People with income in the lowest quintile give a higher percentage of their earnings to charity than do more wealthy Americans. This pattern persists despite the fact that low earners have less disposable income and rarely take advantage of itemized tax deductions for charitable donations.

4. Nonprofits are not profitable.

In 2010, U.S. charities reported more than $2.7 trillion in assets. Even putting aside the multibillion-dollar endowments of Harvard and Yale universities, many lesser-known charities have substantial war chests. In 2007, Ascension Health, a large Midwest charity hospital chain, reported reserves of $7.4 billion, more than twice the cash on hand at the Walt Disney Co.

5. It is easy to find a good charity to support.

...there are more than 60,000 with the word “veteran” in their names — there is little information on groups’ effectiveness. The mutual fund industry employs 159,000 people to help investors make good choices. But there are fewer than 100 people nationwide whose jobs are to help the giving public make wise donations. So what is a conscientious donor to do?
Put in the work. On average, Americans spend more time watching television in one day than they do researching charities in an entire year. Finding good charities takes time. It means using the few organizations, such as GiveWell, that do in-depth studies of charities’ effectiveness. And it means remembering that the best organizations, charitable or otherwise, are built on more than a good story or a charismatic leader.